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Commentary

Subject: The Portals Will Perish (Eventually)

So many predictions find their way into the public airwaves at this time. It's obviously a natural time for forecasting, but I also think it's because prognosticators are as insecure as anyone
else, and feel a need to prove their own value, especially at the beginning of a calendar year.

So pardon my need to be human as I share this intuitive sense about the long-term future of
a business sector that currently dominates our space and headlines: the Web portals.

The Web portals, specifically Yahoo, Aol and MSN, in their simplest forms, are Web sites.
Web sites make money selling impressions generated by visitors turning page views. These impressions are packaged in unique ways to fulfill an advertiser's campaign objectives, but every deal
sold, regardless of how it is paid for, depends on visits, page views and impressions.

The largest slice of a Web portal's page view pie is derived directly or indirectly, from users reading
and responding to personal emails. MSN and Aol serve display ads throughout the email experience, Yahoo does not (they used to), but all three are revenue-dependent on their extremely high
number of visits per unique, which is driven by their users' need to "just check my email." That's why Aol made everyone repeat "you've got mail" -- but now, if you're a Web portal, "you've got
a problem."

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Once kids flip open their first cell phone, they stop reading their email. It's that sudden. For this demo, communication occurs initially through texting and then
onto Facebook. Email is rendered at worse obsolete -- and at best, lags well behind these other two more provocative communication options. Which means page view counts within the portal's
email applications and overall visits per unique from this younger demo will literally vanish from the portal landscape.

But before the portals perish, they will flourish further as the
economy lifts enough to afford market leaders to advertise like one. The portals' home page daily buyouts will sell through at a healthy clip, their search revenue will remain steady, their
non-direct advertising sales revenue will climb, and the battle for portal supremacy will continue for the foreseeable future.

So Yahoo strategists will continue to try to convince the stock
market their company matters. They'll also try to convince themselves their home page redesign isn't a complete disaster (a user who selects a "full page" setting is met with a cascade of
rollover-induced, pop-up menus forcing a content buffet down his throat. No wonder Google gets so much credit for doing absolutely nothing on its home page.).

And Aol strategists will
continue to build distance between themselves and well, themselves, as they launch and promote content properties that siphon traffic from their hub while minimizing any brand association to Aol --
whose brand currently brings to mind a woman named Mimi playing Mahjong in Miami.

All while MSN glides on relatively unnoticed, except for the shiny new Bing it sports around its
search neck. Ahh, but a tiger can't change its stripes. It appears as a new Windows Live user where Hotmail now lives; the design and functionality are effectively encouraging me to
use my home page on Windows Live the way someone would use their Facebook home page: as a launching pad for all communication within a social network. Gates strikes and his opponents
always seem happy to take the hit. That minority investment appears to have paid off for this ruthless genius.

All three portals will continue their extensions into congruous
business lines like ad serving, ad networks, ad exchanges, or the "ad dollars for content you want us to write exchange" announced recently by Aol. Regardless of what direction each portal
heads, this battle will ultimately produce one winner: the portal that buys Facebook -- or more likely, gets acquired by Facebook.

Until then, there remains plenty of success to
drone on about at industry conferences and on quarterly earnings calls -- before the Web portals' collective core business falls off a cliff, when the Boomers log off and no one is there to take their
place.

Ari, I always look forward to reading your columns, so thanks for churning out this nugget today. Granted I skimmed through it, but gonna have to disagree with you on your following statement: "Email is rendered at worse obsolete -- and at best, lags well behind these other two more provocative communication options."*This would be absolutely true if people were only texting and doing all things related to Facebook on their cell phone, but I don't think we're there yet. Facebook is constantly evolving, but one of the recent changes to their Terms of Service is allowing application developers (Zynga, RockYou, FamilyBuilder, and most others) access to users' email addresses when they registered. What that means is that the app developers will now be able to send email communications (newsletters, notifications, even dedicated/solo email drops) on a frequency that they'll play with to ensure their new opt-in list doesn't burn out. The continued rise of social networking sites and applications will result in more emails being sent, so email volume will continue to rise, which means AOL, Hotmail, Yahoo, and Gmail page views and impressions will rise as well. Portals will not perish. Scott Pannier - scottp@47media.net

Clint & Scott, I see where you are both coming from -- my point is that for personal communication -- this younger demo will first text and/or communicate on Facebook which means their email usage for personal communication on a portal will never come close to the levels current portal users generate -- so even if email contact via app developers goes up -- which is a great point Scott, it won't make up the difference in volume the portals currently enjoy.

I have to agree with Ari's premise that the younger age group is using texting and Facebook instead of using email. I'm working with a high school group on a robotics project and emails sent to them get read by about 10%. The question is whether this behavior changes as they get into the work world.

Ari, another gem. Agree on the youth movement and their habits. And email revenue is minor compared to the premium editorial sections like homepage, auto, travel and finance - email programs just fill the behavioral target pools and serve as filler impressions to ad buys.

And definitely not sure where the portal ends up. Too many default settings and need for tabloid content out there. But throwing the boomers at us in the last sentence as the demise of the portals? That's like throwing the slider on a 3-2 count.

I'd like a more concrete prediction from someone of your status - I want a month and a year when this end ;-)

Interesting, Ari. What are your thoughts on those type of sites as News Portals? That is, in essence, what we are building at Newstwit.com - a news portal to fill a specific niche. Would you place that genre of portals in your prediction, as well?

Aaron, I would not include the news portals into this discussion -- just the sites/portals that rely so heavily on the singular act of checking your email to drive visits, subsequent page views (along with search volume).

Tim, the more valuable impressions generated within auto, finance, sports, etc on a portal don't occur unless someone shows up first to read email -- so page views within those more desired sections will be affected by a dramatic decrease in visits once this demo grows up -- I do have to question your baseball metaphor during football season.

Ari, great post on how the portals are losing power as email is waning in its importance. Back in the mid-90's at the birth of the portal, Yahoo was a true "destination" - a starting place that we all went to to begin every journey on the internet. The portals developed email services because our email inbox became the rising starting place for us. But I think it's not just the rise of search and social networks that have displaced the portals: it's also the rise of so many wonderful destination sites themselves that we reach through search. With so many thousands of sites so quickly and easily accessible directly through their brand names and search, we no longer need as much help from MSN, Yahoo, or AOL to find interesting things: an address bar or search box will do.

The real opportunity for MSN, Yahoo, and AOL is to create destination sites and experiences for us that are worth our coming back to time and again. I love Wonderwall as a great example of that: MSN is making that site work to spend our time there, not just 'start' there.